LARGE
EMPLOYERS SEE 8% HEALTH INFLATION
A sampling of the
country’s largest employers reveals health care
costs are expected to rise 8% this year and next
year.
Eighty-two percent
of employers said their health care costs were
at or below budget last year. That’s down two
percentage points from 2005, according to Watson
Wyatt and the National Business Group on Health,
which polled 573 companies that employ 11 million
full-time workers.
“The rate at which
health care costs are increasing may be stabilizing,
but it is still three times higher than the annual
rate of inflation overall,” according to Ted Nussbaum,
Watson Wyatt’s director of group health care consulting.
Employers are trying
a variety of approaches to improve care and reduce
costs. For example, 78% of employers offer a nurse
line, 72% offer health risk appraisals, 42% are
introducing programs to attack obesity, 23% percent
have opened on-site health clinics and 14% have
opened on-site pharmacies.
But NBGH President
Helen Darling says it’s not enough to just have
a program; employers have to get workers to use
it. “Communicating clear information about these
programs and providing incentives that motivate
employers to take the necessary steps to improve
their own health are also necessary,” she says.
March 1, 2007
MORE
EMPLOYERS PROVIDING 100% MATCH
As employers migrate
to defined contribution retirement plans, a growing
number also are increasing the amount of their
match.
While a 50% match
is still the most prevalent option, the proportion
of 401(k) plans with a 100% match increased steadily
during the last five years, from 26% in 2002 to
36% in 2006, reports Mercer Human Resource Consulting.
At least 45% of plans have a 50% match, while
10% will match between 51% and 99% of employee
contributions. Another 8% offer a match of less
than 50%.
Higher matches coupled
with the anticipated jump in DC plan participants
will significantly increase the benefit dollars
allocated toward retirement plans.
TowerGroup predicts
that over the next five years, employer adoption
of automatic enrollment will result in a “dramatic”
20% rise in plan participation, or an additional
9.6 million enrollees. The firm also expects DC
contributions to double during that period.
An influx of nearly
10 million DC plan novices will mean communications
and technology challenges for employers and plan
providers, warns TowerGroup. “These participants
are less likely to be experienced with retirement
plans and have questions on quarterly statements,
investment performance, plan provisions and the
use of self-service features.” March 1,
2007
GOODYEAR
TO SHIFT FROM PENSIONS
Salaried
Workers Will Be Moved To 401(K) Plans
Goodyear Tire &
Rubber Co. said Wednesday that all its salaried
workers will be shifted from pensions to enhanced
401(k) retirement plans and that salaried retirees
will pay more for medical insurance as part of
the company's drive to eliminate $1 billion
in costs by 2008.
The company has 14,000
salaried employees in the United States, with about 2,500
in the Akron area, where it is based.
Most are covered by the company's defined-benefit pension plan,
which will be frozen at the end of 2008 and replaced
with defined-contribution 401(k) plans. Those
hired since 1995 are already in 401(k) plans,
Goodyear spokesman Keith Price said.
After the switch,
employees will still be entitled to the pension
benefits they accrued under the defined-benefit
plan, but from that point on, the company will
make contributions to the employees'
401(k) accounts based on their age and years with
the company.
In addition, Goodyear
will begin matching half of the first 4 percent
of a salaried employee's
annual pay that is contributed to the 401(k).
A defined-benefit
pension plan obligates an employer to pay its
employees a set amount of money upon their retirement.
In a defined-contribution plan, the responsibility
lies with employees to invest the money they and
their employer contribute to the account.
Peter Krouse Cleveland
Plain Dealer March 1, 2007
OPERATION
MATCH: RICHER 401(K) BENEFITS
Employers have been
raising their defined-contribution plan matches
to compensate employees for cutbacks in defined-benefit
pensions and retiree medical benefits, an expert
says.
The gold standard for employer matches to employee
401(k) contributions has moved steadily upward
toward the 100 percent mark over the last five
years, according to a recent study by Mercer Human
Resource Consulting.
The portion of 401(k)
plans with a match rate of 100 percent has risen
from 26 percent of plans in 2002 to 36 percent
in 2006, the study, which is based on an analysis
of more than 900 U.S. companies with
defined-contribution retirement plans.
To be sure, a match
of 50 percent on the first 6 percent of pay that
an employee contributes remains the most typical
formula, says Mike Weddell, a Mercer principal
in Detroit.
But the use of that scheme has fallen from 52
percent to 45 percent of employers over the last
five years, according to the study.
(Mercer's analysis did not capture levels
of employee contributions for which matches are
provided, a measure that some consider an important
trigger of employee 401(k) contributions. For
example, if an employer provided a 100 percent
match on the first 3 percent of pay that an employee
saved and 50 percent on the next 2 percent of
pay contributed, the firm coded the match at 100
percent, according to Weddell.)
Employers have been
raising their matches as way of compensating employees
for cutbacks in defined-benefit pension plans
and retiree medical benefits, according to the
consultant. What's
more, 401(k) match boosts supply employees with
"a very visible benefit, so these tend to be increased,"
he says.
An increasingly
popular formula is the so-called "safe harbor
match"—a 100 percent match on the first 3 percent
an employee saves, and 50 percent on deferrals
between 3 percent and 5 percent of pay, according
to Weddell. The formula exempts 401(k) plans from
Internal Revenue Service tests that compare salary
deferral and match percentages for highly paid
and non-highly paid employees. David M. Katz, CFO.com
BenefitsLink.com February 28, 2007
HEALTH
CARE DRAGS ON GM, FORD DESPITE CONCESSIONS BY
UAW
The positive impact
of health-care cost concessions granted to General
Motors Corp. and Ford Motor Co. by the United
Auto Workers in 2005 may be wearing thin as inflation,
lower vehicle production and added liabilities
from struggling parts suppliers weigh on the Detroit auto making giants.
In a report issued
Monday, credit-grading firm Fitch Ratings says
health-care costs, as a portion of each vehicle
built in the U.S., are set to
rise 11% on average this year from 2005 levels
for GM and Ford. The punishing increase could
heighten urgency surrounding medical expenses,
which are said to be Detroit's primary cost disadvantage compared
to Asian producers. Health-care promises to be
the top issue in UAW labor negotiations that kick
off in less than five months, Fitch says.
Detroit's Big Three are
struggling to restore profitability as they lose
market share to non-U.S. manufacturers and battle
escalating costs in numerous corners of their
business.
Fitch estimates
GM will spend $1,783 in cash health-care expenses
per car this year, while Ford is seen dishing
out $1,064. GM's costs are up 7% from the $1,660
per car it spent in 2005, while Ford's costs are seen skyrocketing 20%
from 2005's
$888. In 2008, Ford's
obligations will shrink nearly $100 compared to
2007 thanks to a recent blue-collar attrition
plan that targeted cutting complete ties with
younger employees, but GM's costs will jump because its plan
was designed to only "nudge workers into retirement,"
the report says.
Officials at GM
and Ford were not immediately available to comment.
The UAW did not return phone calls.
In late 2005, the
UAW agreed to concessions equivalent to $1 billion
in annual cash savings at GM and $850 million
in annual savings at Ford. The concessions were
meant to deflate the auto giants'
health-care disadvantage. However, Fitch insists
any savings from recent UAW concessions will be
"eaten up quickly" by an estimated 6.5% health-care
inflation rate in 2007, continuing output declines
and the migration of liabilities back to GM and
Ford from parts makers Delphi Corp. and Visteon
Corp.
Detroit's health-care burden
is under fresh scrutiny as a barrage of reports
related to DaimlerChrysler AG's potential sale of Chrysler Group
continue to emerge. Chrysler faces $21.1 billion
in future retiree health-care liabilities, according
to Merrill Lynch, and the majority of the obligation
is not funded. The massive liability is one of
the key hurdles DaimlerChrysler is seen facing
as it tries to sell its U.S. unit.
Mike Spector and John D. Stoll February
26, 2007 www.online.wsj.com
PROGRESSIVE
TO APPEAL BIG JURY AWARD
Auto insurer Progressive
Corp. said in a regulatory filing Wednesday that
it plans to appeal the decision of an Oklahoma jury that awarded
$61 million to plaintiffs who sued a company subsidiary
in a civil rights case.
The company in Mayfield
Village
said in its 10-K filing with the Securities and
Exchange Commission any liability in the case
“will not materially impact our financial condition,
cash flows or results or operations.”
On Feb. 22, a jury in U.S. District Court in Oklahoma
City, Okla., delivered the verdict
against the subsidiary, Progressive Casualty,
“in an individual employment-related case brought
under Title VII of the Civil Rights Act of 1964,”
according to the filing.
Progressive’s filing stated that all actions under
Title VII “are subject to a statutory cap on compensatory
and punitive damages of $300,000 (excluding damages
for front pay, back pay and attorneys fees, which
were not covered by the jury’s verdict and will
be decided separately by the court). We, therefore,
believe that the jury’s determination is contrary
to law and also believe that the verdict was not
supported by the facts presented to the court.”
Progressive spokeswoman Leslie Kolleda said the
company would not comment beyond remarks made
in the filing. Scott
Suttell Crain’s Cleveland Business February
28, 2007
GE
CEO MADE MORE THAN $15M IN 2006
The chairman and
chief executive of General Electric Co., the highly
profitable conglomerate that produces aircraft
engines and TV programming and provides health
care and financial services, received $15.2 million
in compensation last year, according to a company
proxy filed Tuesday.
But GE also disclosed
that CEO Jeffrey Immelt's pay package was still a bit smaller
than that for the long-time head of its NBC business.
Immelt, 51, was
paid $3.3 million in salary, a $5 million bonus
and $548,013 in other benefits, including private
use of company airplanes. In addition, he was
awarded performance share units and stock options
that were valued at $6.3 million on the day they
were granted last year. The performance units
will convert into GE stock after five years if
the company meets certain financial benchmarks,
according to the proxy.
The company's
compensation committee based its decisions on
Immelt's
performance against his financial, strategic and
operational goals for 2006, the proxy statement
said.
In the statement,
the committee said that the company had an excellent
year and Immelt retained an excellent team.
Fairfield-based
GE reported last month that adjusted 2006 income
climbed 11 percent, to $20.67 billion, or $1.99
per share, from $18.66 billion, or $1.76 per share,
in 2005. The results were just above Wall Street
expectations for full-year earnings of $1.98 a
share.
Full-year sales
rose 10 percent to $163.39 billion, from $147.96
billion a year ago, beating Wall Street estimates
for sales of $162.8 million.
Robert Wright, who
until recently headed GE-owned NBC Universal,
received more than $15.6 million in compensation,
including $520,291 in above-market earnings on
an employee salary deferral plan.
The Associated Press
calculations of total pay include executives'
salary, bonus, incentives, perks, above-market
returns on deferred compensation and the estimated
value of stock options and awards granted during
the year. The calculations don't
include changes in the present value of pension
benefits. Stephen Singer AP Business Writer
FindLaw.com February 27, 2007
OSHA
RELEASES NEW "IT'S
THE LAW" POSTER
OSHA recently announced
publication of its new "It's The Law" poster. The free poster,
also known as the OSHA notice of employee rights,
is required to be displayed in every workplace
in America. Employers
are not required to replace their existing poster
with the new version. The poster informs employers
and employees of their rights and responsibilities
for a safe and healthful workplace. Copies are
available in both English and Spanish from OSHA's
Web site. Free printed copies may be obtained
from any OSHA regional or area office,
or by writing to the OSHA Publications Office,
Room N3101, 200 Constitution Ave. N.W.,
Washington, D.C.
20210; phone (202)
693-1888. March 1, 2007 OSHA
Poster
web address: http://www.osha.gov/Publications/osha3165.pdf
D'CUNHA V. GENOVESE/ECKERD CORP.
In case involving
claims alleged under the Age Discrimination in
Employment Act, summary judgment for defendant
is reversed as the district court failed properly
to apply the burden-shifting framework under the
ADEA. There remains a genuine issue of material
fact as to whether the reasons given for not hiring
plaintiff were pretextual such that a jury could
reasonably find that he suffered an adverse employment
action because of his age. FindLaw.com March
2, 2007
REPA
V. ROADWAY EXPRESS, INC.
In a suit under
the Family and Medical Leave Act alleging that
plaintiff's
employer improperly required her to use sick and
vacation leave while she was using FMLA leave
and receiving disability benefits, summary judgment
for plaintiff is affirmed where: 1) leave pursuant
to a temporary disability benefit plan, even a
third party plan, falls outside of the portion
of FMLA allowing employers to require employees
to substitute paid leave for unpaid FMLA leave;
and 2) defendant waived its right to challenge
the validity of the statute by failing to present
the argument in the district court. FindLaw.com
March 2, 2007
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